Valuations coming down
As I write this, the Top40 has been trading just below all-time highs but that just confirms the range we’ve been trading in since mid-2014, pretty much sideways for two years. While this may be frustrating, you need to remember two important points: Firstly, within the Top40, many stocks are well above the 2014 levels while others are well below – it is about owning the right shares. Secondly, if these shares are viewed as an index, what we see is valuations that have come down. P/Es reduce by falling prices or with flat prices and rising earnings; we’ve seen the latter although the increases in earnings have often been modest.